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Shout it out cloud: why Australian CIOs should use cloud to transform

CIOs in Australia, like everywhere else, must look at the cloud options available or face being left behind

The shift of government, in Australia and elsewhere, to ‘cloud-first’ models of operation has been so marked that the exception is no longer the company that is using the cloud, but the company that is not.

The growth is reflected in dizzying projections for investment in cloud spending, both in the construction of private-cloud infrastructure – a reinvention of on-premises computing that facilitates IT-enabled functional business convergence – and the adoption of public-cloud infrastructure, which is now not only accepted but prioritised within many organisations’ business and technology strategies.

Projections of public-cloud spending by IDC suggest that it will grow six times faster in 2016 than the overall IT spending growth rate, reaching US$141bn in 2019.

Large companies will lead the way, spending more than US$80bn in 2019, but small and medium business will account for more than 40% of this cloud spending, which IDC senior vice president and chief analyst Frank Gens believes will be driven by suppliers’ own software-as-a-service (SaaS) shift pushing organisations to the cloud whenever they update.

“By 2018 most software vendors will have fully shifted to a SaaS/PaaS code base,” Gens said. “New solutions born on the cloud and traditional solutions migrating to the cloud will steadily pull more customers and their data to the cloud… Industry-specific applications will be a driving force as businesses look for solutions that can be easily configured to their unique business and vertical requirements.”

Year of platforms

This will make 2016 the ‘year of platforms’ according to IDC, with more than 70% of organisations accessing public-cloud capabilities via aggregation hubs operated by network or interconnect providers.

“With the huge increase in the number and diversity of services available in the market, organisations across industries will shift steadily toward cloud-first strategies to enable digital transformation,” Gens said.

The move towards digital transformation highlights the maturity in thinking around cloud, which has now passed the functional inflection point and is being considered not for its technological novelty but its potential application to high-level business requirements.

Security driver

Indeed, whereas cloud has often been thought of in terms of its architectural flexibility, Gartner analysis suggested a growing proportion of cloud adopters will be making the shift to take advantage of the improved security being implemented by cloud suppliers. This is a big jump from earlier models, which, particularly in sectors such as government and banking, were constrained by extreme concerns that cloud is inherently less secure than on-premise solutions.

Particularly driven at first by US government requirements for better security, this trend will see security overtake cost savings and agility as the main reason why government agencies embrace cloud solutions.

“This will be driven by fear of being breached now that there is a reasonable array of certified offerings,” said Glenn Archer research vice president for government at Gartner in Australia. He said CIOs “will accept that public data – along with lower classifications of sensitive data – can and should move to the public cloud… Many [cloud] providers can invest more [in security] than what most nations could afford, let alone the average government agency.”

This ongoing pattern of cloud investment kept datacentre systems as the only area of IT investment that grew in 2015 and, according to a Gartner forecast, will drive a further 3% growth in spending during 2016. IT services and software will return to growth in 2016 (at 3.1% and 5.3% respectively) largely on the back of what Gartner calls “accelerating momentum in cloud infrastructure adoption and buyer acceptance of the cloud mode” that will eclipse the 0.6% rise in overall IT spending this year.

Suppliers turn to face cloud

Suppliers are playing their part to rework their offerings around this cloud-based dynamic. Dell, for one, recently launched a DS10 operating system that exploits the Open Compute Project’s Switch Abstraction Interface to provide open interfaces between network elements, thereby facilitating the integration of far-reaching software-defined network (SDN) infrastructure to support cloud deployments.

Tempered by the fruits of Dell’s US$53bn acquisition of network and storage behemoth EMC, the new DS10 environment “provides the unique flexibility and programmability necessary for a modern cloud provider to innovate and succeed in a fast-changing environment”, said Jason Long, director of network architecture and operations at software company Joyent. “We’re already seeing significant operational benefits from having server-like manageability combined with our server-centric automation tools.”

This architectural reconsideration will not only drive the level of adoption of cloud applications and services, but will also see areas such as cloud storage explode in 2016 as Dell-EMC and other vendors work to blur the lines between public and private-cloud storage. A recent Western Digital CIO survey, for example, found that storage reliability outranks cost as the most important strategic consideration for CIOs, with 35% of respondents expecting to have more than half their data stored in the cloud by the end of 2016.

While 84% of respondents to that survey are planning, implementing or have just completed public or private-cloud initiatives, 34% said that availability of funds was the biggest hurdle holding back their datacentre ambitions.

The next enterprise step

Bullish forecasts on the growth of cloud were validated by recent IDC figures suggesting that cloud infrastructure spending grew 23% in the third quarter of 2015, with public-cloud storage spending growing 26.7% year-on-year and led by surging adoption of solutions from infrastructure giants HP, Dell, Cisco and EMC.

Indeed, the involvement and strong growth of such mainstream brands in the expansion of the top-heavy cloud market confirms that this year’s cloud architectures will continue to be defined not by small innovators, but by legacy giants that see the cloud as a natural next step for the enterprise architecture. Most customers will follow their lead, even as others set the pace with innovative cloud-based digital transformations that will collectively continue to advance the state of the art in 2016 and beyond.

Cloud-first drives the agenda in 2016

So-called cloud-first strategies have hit the mainstream, with IDC projections for 2016 underscoring the importance of the cloud ecosystem as a transformative force in the enterprise. This will see a shift in the services market, which will remain a key enabler as the IT industry works its way through what IDC has labelled “a banner year for digital transformation to take root”. Here are 10 of IDC’s key predictions for 2016 and beyond:

  1. Digital transformation will gain momentum, continuing to realign the industry – and CIO strategies – around cloud-based services. Service providers need to emphasise their capabilities in integrated cloud, cognitive, mobile, and analytics services.
  2. A greater focus on governance between the IT organisation and line of business operations will ensure decisions about risk, suppliers, innovation and agile development are made in lock-step.
  3. Fully one-third of Asia Pacific enterprises will pursue a ‘cloud first’ strategy, and cloud-related IT expenditure will increase to 26% of overall budgets this year.
  4. Traditional outsourcing managed services are rapidly shifting to a cloud delivery model, with more than half of managed services expected to be delivered this way by the end of 2016.
  5. By the end of this year, 65% of Asia Pacific enterprise strategies will include what IDC called a “significant” transformation aspect.
  6. Line of business and IT will partner on this transformation as never before, with 80% of major decisions driven by such a partnership by 2018.
  7. Software-defined infrastructure will supplant proprietary solutions in the datacentre, with 30% of enterprises implementing such technology in their datacentres this year.
  8. By 2018, IDC believes 20% of enterprises will leverage digital platforms from firms like WeChat, Uber, GE/Predix and PTC to achieve their transformation goals.
  9. By 2020, more than 75% of ideas, talent and innovation will be sourced through “ecosystems of engagement”.
  10. By the end of 2017, some 55% of enterprises will have shifted their security infrastructure management to third parties.

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